Saturday, February 5, 2011

Trust Issues

How to restore trust in business

Business has had a disastrous year. Iconic companies have crumbled, profits have evaporated and unemployment has grown rapidly. Pundits have mourned the bleak state of trust in business and governments. What has been mourned has now been measured.

According to the 10th Edelman Trust Barometer, which surveyed 4,500 upper income, highly educated people in 20 countries, nearly two-thirds (62 per cent) say they trust corporations less today than they did a year ago. In the US, home of some of the greatest corporate collapses, the survey recorded the most dramatic plunge: only 38 per cent say they trust business to do what is right (a 20 per cent drop from last year) and just 17 per cent say they trust the information they get from a company’s CEO.

By a 3:1 ratio, respondents want tougher regulation of business. At the same time, two-thirds think business should partner with government to solve global issues like the credit crisis and energy costs. Yet to play the meaningful role it must in shaping the new world, business will have to make the case that it can be trusted – and have that case believed. At the moment, this appears a daunting task.
So where does business go from here?

Business leaders need to think differently about what it means to be a public company. No longer can their sole objective be to maximise profits. Our data suggest a strategy of “public engagement”, by means of a fundamental shift in both operations and communications.

The four pillars of “public engagement” are:

• Private-sector diplomacy: Business has both the opportunity and the responsibility to become a primary actor in developing solutions to global problems. Business must partner governments and NGOs to address key policy issues and the world’s most pressing problems, not merely the ones that have an impact on their bottom line. This is an opportunity for business to act as a private sector diplomat, recommending appropriate regulatory frameworks across borders. If companies fail to take the initiative to do so, they run the risk of having policies thrust on them.
• Mutual social responsibility: Companies must realign their business practices so they deliver dual objectives: benefit society and the bottom line. Companies must integrate into their products and services approaches to societal problems such as climate change, healthcare and energy independence. Immediate stakeholders such as employees and customers must be invited to participate in a company’s social responsibility decisions and actions – and the public at large must be kept informed about the progress the company is making toward those goals.
• Shared sacrifice: CEOs must demonstrate that they too feel the burden of the recession. At a time when workers are losing jobs and investors are seeing stock values plummet, voluntary executive pay cuts and forfeiting of bonuses send a powerful message that leaders are in tune with the realities facing employees. Leaders also must communicate with employees about the problems confronting the company and welcome their voices. This type of transparency and collaborative spirit will help engage them in finding and embracing solutions.
• Repeated, swift and accountable communications: 60 per cent of our respondents said they need to hear information about a company three to five times before they believe it. The CEO should set forth the company’s position, but then it must be echoed by others – by individuals who often sit outside the company – including industry experts, academics and ordinary citizens. Companies will be well served by moving from a mindset of control to one of contribution.

Mainstream media continues to be a critical way to reach opinion formers, but it is not the only one. Companies should inform, with a real commitment to speed, the conversations among the new influencers – always under way on blogs, in discussion forums, and bulletin boards. Every company can be a media company by creating easily accessed, substantive online content that can be improved by the public.

An adherence to transparency is at the core of each of these pillars. Organisations must be forthright and honest in their actions and communications. When problems arise within companies, stakeholders need to see senior executives take a visible lead in acknowledging errors, correcting mistakes and working with employees to avoid similar problems going forward. The essence of public engagement is the commitment of companies to say – and do as they say. In a time of utter distrust, business leaders must make the case for actions and then demonstrate their progress against those goals.

Among our global audience of 25-to-64-year-olds, being able to trust a company is one of the most important factors in determining a company’s reputation. It ranks just below the quality of a company’s products and its treatment of employees, on par with a company’s financial future, and more important than job creation, giving back to the community, and innovation in products and services.
Business has had the benefit of the doubt for the past 25 years. It must now re-earn the mantle of authority by restoring the confidence that has been so widely lost. Without trust, it will be difficult for it to help rebuild the financial system or have the licence to innovate – much less operate.

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